Debt and money are not interchangeable financial tools. Edward Griffin, in his book, ‘The Creature from Jekyll Island’, correctly identifies the tension between politicians and monetary scientists. Politicians need money to facilitate fiscal spending, which is not possible without the help of monetary scientists. It is with their help (central bankers, private banking bosses etc) that new money is created through domestic lending. This form of monetary expansion is very similar to printing money.

Prolonged use of domestic debt leads to an increase in inflation, erosion of trust and a concerning debt to GDP ratio.

A lot of our public discourse is focused on outside lenders such as the International Monetary Fund or China. But the underlying issue is more domestic than international. According to the Ministry of Finance’s Semi-Annual Public Debt Bulletin (July to December 2024), domestic debt has risen to Rs49.88 trillion, accounting for 67.4 per cent of total public debt.

The external component of debt, at Rs24.13tr (33pc of total debt), is significant but lesser. Interest payments surpassed Rs5.1tr, rising from Rs4.2tr last year — an 18pc increase — primarily on domestic borrowing.

If green Sukuk is used to finance productive, climate-friendly projects rather than raising cheaper debt, it could set a new standard for responsible Islamic finance

As reported by the Business Recorder, recent SBP data shows a sharp 66pc drop in domestic borrowing this fiscal year, offering short-term relief, but not a solution. The interest burden means that every other rupee the federal government receives goes towards debt repayment; a precarious imbalance for a nation in dire need for development funds.

There is, however, a silver lining. With only 17.7pc of government securities on fixed rates, interest payments are also variable. This could........

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